NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS AUG 21 2024 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA, No. 23-15712
Plaintiff-Appellant, D.C. No. 3:18-cv-05931-JCS
v. MEMORANDUM* TIMBERLY E. HUGHES,
Defendant-Appellee.
UNITED STATES OF AMERICA, No. 23-15713
Plaintiff-Appellee, D.C. No. 3:18-cv-05931-JCS
v.
TIMBERLY E. HUGHES,
Defendant-Appellant.
Appeal from the United States District Court for the Northern District of California Joseph C. Spero, Magistrate Judge, Presiding
Submitted August 14, 2024** San Francisco, California
* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). Before: GRABER, CALLAHAN, and KOH, Circuit Judges.
Timberly Hughes appeals the district court’s determination that she willfully
failed to report foreign bank accounts, in violation of 31 U.S.C. §§ 5314 and 5321,
and its entry of final judgment against her in the amount of $238,125.19. The
United States appeals the district court’s determination that the United States is not
entitled to prejudgment interest or late payment penalties under 31 U.S.C.
§ 3717(a)(1), (e)(2). We have jurisdiction under 28 U.S.C. § 1291. We reject
Hughes’s challenges to the district court’s decision, but we agree with the United
States that the district court should have imposed prejudgment interest and late
payment penalties. Accordingly, we affirm in part, reverse in part, and remand.1
1. Hughes makes only passing references to an argument that the district
court erred in applying the willfulness standard and concluding that her failure to
file was willful. Such “cursory” arguments are usually deemed waived. Badgley
v. United States, 957 F.3d 969, 978–79 (9th Cir. 2020). Even accounting for the
“leeway” afforded pro se parties, Huffman v. Lindgren, 81 F.4th 1016, 1021 (9th
Cir. 2023), there is nothing in the record to suggest that the district court clearly
erred in its willfulness determination. See DePuy Synthes Sales, Inc. v.
1 In a concurrently filed opinion, we address Hughes’s contention that the district court applied the wrong legal standard when determining that her failure to file was willful. As to that issue, we affirm.
2 Howmedica Osteonics Corp., 28 F.4th 956, 961 (9th Cir. 2022) (factual findings
are reviewed for clear error). The district court correctly observed that there was
“no doubt” that Hughes saw the questions about filing a Report of Foreign Bank
and Financial Accounts (“FBAR”) given that she answered the questions in both
2012 and 2013. In 2012, she even affirmed that she was required to file an FBAR
(but she failed to do so). Moreover, the court did not clearly err in finding
“inconsistent” and thus “not credible” Hughes’s explanations as to why she failed
to file.
2. Hughes devotes the bulk of her briefing to arguing that at least some
of her foreign bank accounts with ANZ Bank New Zealand Limited contained
funds that “were held as collateral or otherwise unavailable to her”; were therefore
“correspondent or nostro accounts” that need not be reported under 31 C.F.R.
§ 1010.350(c)(4)(iv); and, accordingly, that their balances should not have been
considered when calculating civil FBAR penalties against her. In support, Hughes
offers a September 2023 letter (six months after the entry of final judgment) from
ANZ Bank that purports to state that she lacked access to the funds in her accounts.
Hughes concedes that she waived this argument because the pertinent
regulation, 31 C.F.R. § 1010.350(c)(4)(iv), “was not discovered” until Hughes
began “working on her appeal.” The district court denied Hughes’s motion for
reconsideration because Hughes failed to explain why she was unable to obtain the
3 letter from ANZ Bank until after the case had concluded or how 31 C.F.R.
§ 1010.350, which had been referenced throughout the case, was “newly
discovered evidence.” Thus, the letter from ANZ Bank is not properly part of the
record on appeal. Nonetheless, we add that Hughes’s argument fails on the merits
as well. Even assuming that Hughes did not have access to all funds in the ANZ
Bank accounts, this does not establish that the accounts were “correspondent or
nostro accounts,” terms that refer to types of accounts that a bank from one country
holds at a bank in another country. See, e.g., Licci ex rel. Licci v. Lebanese
Canadian Bank, SAL, 732 F.3d 161, 165 n.3 (2d Cir. 2013); United States v. BCCI
Holdings (Luxembourg), S.A., 977 F. Supp. 449, 452 n.3 (D.D.C. 1997). Hughes
makes no attempt to show, and the ANZ Bank letter does not indicate, that the
bank accounts associated with and named after her winery and wine bar were in
fact opened and operated by a non-New Zealand bank at ANZ Bank. Indeed,
Hughes stipulated that she had “financial interest in, and signature authority over”
the bank accounts at issue.
Hughes’s contention that the assessment of penalties against her was
arbitrary and capricious relies almost entirely on the above waived and incorrect
premise that she was not required to report some or all of her accounts. To the
extent that Hughes also renews her argument that the United States double counted
certain funds transferred between accounts, she offers no reason to disturb the
4 district court’s careful analysis and conclusion that Hughes misstated the relevant
account numbers and balances and failed to show that there were additional
transfers ignored by the United States.
3. Lastly, Hughes asserts that she was unable to defend herself because
she was denied access to an internal IRS document underlying the agency’s
decision to seek willful FBAR civil penalties. Hughes does not argue that the
district court abused its discretion in concluding that the “notes and
communications” among IRS agents, managers, and counsel fell “squarely within
the deliberative process privilege.” See, e.g., Transgender L. Ctr. v. Immigr. &
Customs Enf’t, 46 F.4th 771, 783 (9th Cir. 2022) (explaining basics of the
privilege). Hughes instead simply states that, without access to the unredacted
document, she was unable to see how the penalties against her were calculated.
This assertion is incorrect. As the district court explained, the agency’s penalty
calculations were included in the record, unredacted except for Hughes’s social
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NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS AUG 21 2024 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA, No. 23-15712
Plaintiff-Appellant, D.C. No. 3:18-cv-05931-JCS
v. MEMORANDUM* TIMBERLY E. HUGHES,
Defendant-Appellee.
UNITED STATES OF AMERICA, No. 23-15713
Plaintiff-Appellee, D.C. No. 3:18-cv-05931-JCS
v.
TIMBERLY E. HUGHES,
Defendant-Appellant.
Appeal from the United States District Court for the Northern District of California Joseph C. Spero, Magistrate Judge, Presiding
Submitted August 14, 2024** San Francisco, California
* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). Before: GRABER, CALLAHAN, and KOH, Circuit Judges.
Timberly Hughes appeals the district court’s determination that she willfully
failed to report foreign bank accounts, in violation of 31 U.S.C. §§ 5314 and 5321,
and its entry of final judgment against her in the amount of $238,125.19. The
United States appeals the district court’s determination that the United States is not
entitled to prejudgment interest or late payment penalties under 31 U.S.C.
§ 3717(a)(1), (e)(2). We have jurisdiction under 28 U.S.C. § 1291. We reject
Hughes’s challenges to the district court’s decision, but we agree with the United
States that the district court should have imposed prejudgment interest and late
payment penalties. Accordingly, we affirm in part, reverse in part, and remand.1
1. Hughes makes only passing references to an argument that the district
court erred in applying the willfulness standard and concluding that her failure to
file was willful. Such “cursory” arguments are usually deemed waived. Badgley
v. United States, 957 F.3d 969, 978–79 (9th Cir. 2020). Even accounting for the
“leeway” afforded pro se parties, Huffman v. Lindgren, 81 F.4th 1016, 1021 (9th
Cir. 2023), there is nothing in the record to suggest that the district court clearly
erred in its willfulness determination. See DePuy Synthes Sales, Inc. v.
1 In a concurrently filed opinion, we address Hughes’s contention that the district court applied the wrong legal standard when determining that her failure to file was willful. As to that issue, we affirm.
2 Howmedica Osteonics Corp., 28 F.4th 956, 961 (9th Cir. 2022) (factual findings
are reviewed for clear error). The district court correctly observed that there was
“no doubt” that Hughes saw the questions about filing a Report of Foreign Bank
and Financial Accounts (“FBAR”) given that she answered the questions in both
2012 and 2013. In 2012, she even affirmed that she was required to file an FBAR
(but she failed to do so). Moreover, the court did not clearly err in finding
“inconsistent” and thus “not credible” Hughes’s explanations as to why she failed
to file.
2. Hughes devotes the bulk of her briefing to arguing that at least some
of her foreign bank accounts with ANZ Bank New Zealand Limited contained
funds that “were held as collateral or otherwise unavailable to her”; were therefore
“correspondent or nostro accounts” that need not be reported under 31 C.F.R.
§ 1010.350(c)(4)(iv); and, accordingly, that their balances should not have been
considered when calculating civil FBAR penalties against her. In support, Hughes
offers a September 2023 letter (six months after the entry of final judgment) from
ANZ Bank that purports to state that she lacked access to the funds in her accounts.
Hughes concedes that she waived this argument because the pertinent
regulation, 31 C.F.R. § 1010.350(c)(4)(iv), “was not discovered” until Hughes
began “working on her appeal.” The district court denied Hughes’s motion for
reconsideration because Hughes failed to explain why she was unable to obtain the
3 letter from ANZ Bank until after the case had concluded or how 31 C.F.R.
§ 1010.350, which had been referenced throughout the case, was “newly
discovered evidence.” Thus, the letter from ANZ Bank is not properly part of the
record on appeal. Nonetheless, we add that Hughes’s argument fails on the merits
as well. Even assuming that Hughes did not have access to all funds in the ANZ
Bank accounts, this does not establish that the accounts were “correspondent or
nostro accounts,” terms that refer to types of accounts that a bank from one country
holds at a bank in another country. See, e.g., Licci ex rel. Licci v. Lebanese
Canadian Bank, SAL, 732 F.3d 161, 165 n.3 (2d Cir. 2013); United States v. BCCI
Holdings (Luxembourg), S.A., 977 F. Supp. 449, 452 n.3 (D.D.C. 1997). Hughes
makes no attempt to show, and the ANZ Bank letter does not indicate, that the
bank accounts associated with and named after her winery and wine bar were in
fact opened and operated by a non-New Zealand bank at ANZ Bank. Indeed,
Hughes stipulated that she had “financial interest in, and signature authority over”
the bank accounts at issue.
Hughes’s contention that the assessment of penalties against her was
arbitrary and capricious relies almost entirely on the above waived and incorrect
premise that she was not required to report some or all of her accounts. To the
extent that Hughes also renews her argument that the United States double counted
certain funds transferred between accounts, she offers no reason to disturb the
4 district court’s careful analysis and conclusion that Hughes misstated the relevant
account numbers and balances and failed to show that there were additional
transfers ignored by the United States.
3. Lastly, Hughes asserts that she was unable to defend herself because
she was denied access to an internal IRS document underlying the agency’s
decision to seek willful FBAR civil penalties. Hughes does not argue that the
district court abused its discretion in concluding that the “notes and
communications” among IRS agents, managers, and counsel fell “squarely within
the deliberative process privilege.” See, e.g., Transgender L. Ctr. v. Immigr. &
Customs Enf’t, 46 F.4th 771, 783 (9th Cir. 2022) (explaining basics of the
privilege). Hughes instead simply states that, without access to the unredacted
document, she was unable to see how the penalties against her were calculated.
This assertion is incorrect. As the district court explained, the agency’s penalty
calculations were included in the record, unredacted except for Hughes’s social
security number.
4. As for the cross appeal, we agree that the United States was entitled to
collect prejudgment interest and late payment penalties. The district court’s
suggestion that the initial demand letter sent to Hughes in 2016 might not be valid
because part of the United States’ penalty calculation had been set aside as
arbitrary and capricious cited no authority, and we find it unpersuasive. The
5 district court did not set aside the demand letter in its entirety or disturb the
demand letter’s determination that Hughes had willfully violated the FBAR statute,
nor did it require the United States to send Hughes a new demand letter as part of
its recalculated penalty. See, e.g., United States v. Schwarzbaum, 24 F.4th 1355,
1367 (11th Cir. 2022) (a “remand to the IRS for recalculation of [a defendant]’s
FBAR penalties” does not start the process over again, because the remand is “not
for the IRS to issue new penalties, but for it to recalculate the penalties it has
already assessed”). The district court’s remand for the agency to recalculate
Hughes’s penalties did not render the initial demand letter invalid for purposes of
calculating prejudgment interest or late payment penalties.
We also disagree with the district court that the United States was required
to prove the applicable Treasury rates for assessing interest or late payment
penalties. By statute, both rates are prescribed by the Treasury; the rates are not
questions of fact that must be proven at trial. See 31 U.S.C. § 3717(a)(1) (the
Treasury “shall publish” the annual rate of interest on debts owed to the United
States), (e)(2) (agencies “shall assess” late payment penalties of “not more than 6
percent a year” for failure to pay a debt); 31 C.F.R. § 5.5(a) (Treasury entities
specifically “shall assess” penalties “at the rate of 6% per year”). Moreover,
Hughes never challenged the 1% interest rate or 6% penalty rate, either below or
on appeal.
6 AFFIRMED in part, REVERSED in part, and REMANDED with
instructions to award prejudgment interest and late payment penalties against
Hughes and in favor of the United States. Each party shall bear its own costs on
appeal.